Wal-Mart: Strategic Management

An in depth analysis of Wal-Mart and

its global strategic management and
electronic distribution

Analysis for Business Policy: Strategic Management.
Instructor: Dr. M. eit!el" De#ry $ni%ersity" &ebruary '(()"
Austin" *+.

Members of the *eam:

Marcus Bedford
,on -able
Wayne .ulic/y
-onstince Sanche!
*able of -ontents:

01ecuti%e Summary.222222222222222222222222.'
Problem Statement 222222222222222222222222...'
Situational Description and Strategic Analyses 2222222222222...3
Strategic Analysis
.%er%ie4 5 6istory.22222222222222222..3
01ternal 0n%ironment.222222222222222227
Internal 0n%ironment.22222222222222222.7
Intellectual Assets.22222222222222222......8
Strategic &ormulation
Business 9e%el Strategy2222222222222222.8
-orporate 9e%el Strategy222222222222222...:'
International Strategy22222222222222222:;
Digital Business Strategy222222222222222..:<
Strategic Implementation
Strategic -ontrol plus =o%ernance222222222222:<
.rgani!ational Design22222222222222222:8
9eadership22222222222222222222......'(
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Inno%ation22222..222.222222222222...''
.pportunities plus >e4 #entures2..22..22222222..''
Proposed Alternati%e Solutions2222222222222222222....'3
ecommendations222222222222222222222222.....'3
Summary222222222222222222222222222.......';
Bibliography222222222222222222222222222.'<













01ecuti%e Summary

*hough out the years since their inception in the :87(?s" Wal-Mart has
gro4n at an alarming rate. Although in the early years Wal-Mart 4as thought
to be unsuccessful" it has since pro%en to be a retailer of the future. It is the
largest retailer in the 4orld. It has the highest gross pro@ts of any company in
the 4orld as 4ell as the highest net pro@ts. Wal-Mart has also topped the
&ortune <(( ; times. According to AWal-Mart - .ut in &rontB
i
it has the
follo4ing -orporate strategies:

Broadening .ur Appeal to All of .ur -ustomers
Becoming an 0%en Better Place to Wor/
Impro%ing Business .perations and 0Cciency
Dri%ing =ro4th in .ur International Business
Ma/ing $niDue -ontributions to -ommunities

Because the public %ie4 of Wal-Mart is some 4hat tarnished" they are ma/ing
an eEort both corporate and globally to address the image issues that they
ha%e. Many communities ha%e refused or at least petitioned to ha%e Wal-
Marts banned. Wal-Mart has tried to gain public interest by lining itself 4ith
politicians to achie%e its o%erall goals.

While the goals that Wal-Mart has currently for its corporate strategy
may lead them to their o%erall achie%ement" *eam Wal-Mart does not belie%e
that it 4ill lead Wal-Mart into continued success. Wal-Mart has addressed all
the issues listed abo%e. 6o4e%er" our team thin/s their success" although
dri%en by these goals" contains maFor problems that arise 4hile putting these
- : -
goals into action. Some of the recommendations that 4e ha%e de%eloped are
more at the local store le%el" 4here some of the goals need to be
implemented globally. *he public image needs to be addressed" the treatment
of their employees both 4ith regards to their pay scale as 4ell as the
traumatic treatment that is displayed in the %ie4 of the media. -orporate
hunger for additional mar/et gain has clouded their Fudgment 4hen it comes
to hiring to retain %s. hiring to @ll head count. Wal-Mart also needs to address
its %ie4s on ho4 to na%igate" in@ltrate and dominate the global discount retail
industry.

Wal-Mart needs to address the issues that they currently ha%e 4ith the
public" their employees and themsel%es. Although many 4or/ for Wal-Mart it
is not the best place to 4or/ if you are a single mother" student or minority.
Wal-Mart also needs to implement changes on ho4 it treats and 4or/ 4ith
physically disabled people.

Problem Statement

*he best 4ay to describe the problems that Wal-Mart is facing is the lac/ of
being able to or Fust not implementing their once belie%ed motto that
Acustomers are al4ays rightB. Although customers are not al4ays right"
associates at Wal-Mart should treated people" customers and the public 4ith
respect and admiration. *he associates at Wal-Mart once had a great
company behind them that belie%ed that 4ithout them" they 4ould not be
4here they are today. Wal-Mart needs to regain that perspecti%e in order to
propel itself into the future of success. *heir corporate tactics of ma/ing
money and reducing costs incurred by employee bene@ts needs to be
readdressed and realigned 4ith the %ie4s of Sam Walton.


Situational Description and Strategic Analyses

*hrough continual research and readings *eam Wal-Mart has gained a better
understanding and perspecti%e of America?s fascination 4ith Wal-Mart.
Despite the constant barrage of negati%e press relating to its handling of labor
issues" employee bene@ts" %endor practices and customer ser%ice" the retailer
is able to thri%e. Wal-Martfacts.com brings an enlightening perspecti%e on
Wal-Mart %ie4s and ho4 they and the public percei%e its pitfalls. &irst" 4e are
going to e1amine the history of the company. Where did Sam Walton get the
idea to come up 4ith a retail store li/e Wal-MartG Did he actually e1pect to be
as large of the retailer as it is no4G .ur team 4anted to better understand
4here Wal-Mart is 4ith its corporate le%el strategy" business le%el strategy"
strategic formulation and it o4n %ie4s on its implementation. W We 4ill
further e1plore some alternati%e solutions and ma/e recommendations as to
4here the public %ie4s the company in regards to the topics of discussion"
and 4here our team?s %ie4s" and its perceptions of 4here they are today in
ho4 4ell it is or is not implementing their o4n strategies. We 4ill also ma/e
recommendations and e1plain ho4 and 4hy those recommendations 4ere
deri%ed and ho4 they should be implemented" as 4ell as ho4 Wal-Mart should
ta/e action to address those needs.

*hroughout the entire document you 4ill gain insight into the tactics that Wal-
Mart has used to achie%e its goals. By reHecting on ideas and principles of
- ' -
4here they 4ere" 4here they 4ant to be and ho4 they percei%e their path to
gaining the success to achie%e its goals a better understanding 4ill emerge.
Although our ideas may ha%e some of the same fundamental principles" 4e
%ie4 Wal-Mart?s path to achie%e its goal in a much diEerent light.

Strategic Analysis

.%er%ie4 and 6istory




In :87' Sam Walton opens his @rst Wal-Mart in ogers" Ar/ansas. 6is
lo4 price approach to retail soon became a model that all Wal-Mart stores
4ould follo4. ISell brand merchandise at lo4 prices.I
ii
Interesting enough"
:87' 4as the same birth year for Jmart" *arget and Wal-Mart. Sam Walton"
founder of Wal-Mart 4anted to ta/e ad%antage of the opportunity and
establish a discount retail company. In the beginning the stores 4ere started
in the small to4ns in the south. During that time period it 4as considered as
the least successful retailer" ho4e%er it has outgro4n most of its competition.
Sam?s mission 4as to ha%e an e%eryday lo4 price discount retail store. &i%e
years into founding Wal-Mart" Sam felt that he needed to e1pand before his
competitors out ran him. ADuring the :8)(s" the retail industry became
highly competiti%e" but at the same time the economy became 4ea/ due to
inHation Sears 4as the leading retailer in the nation" during the :8)(s"
ho4e%er" the recession of :8);-:8)< and inHation aEected Sears ad%ersely.
Sears targeted middle class families and e1panded its o%erhead. WalMartKs
strategy 4as to compete 4ith its ri%als and lo4er o%erhead e1penses.
-ompared 4ith Sears" 4ho consisted of more than 7"((( distribution centers"
Wal-Mart had only '"<(( comparable units.B
iii
Although Wal-Mart 4as under
@nanced" it managed to ha%e 3( stores in the L years. In order to sell the
merchandise at a lo4 rate" Wal-Mart?s purchasing cost must also be at a lo4
rate. 6o4e%er" suppliers and %endors 4ere not 4illing to supply merchandise
at the rate Wal-Mart 4as as/ing. As result of this he built 4arehouses so that
merchandise can be bought in bul/ at a cheaper price because of the large
%olumes. At the same time Wal-Mart needed to e1pand" but did not ha%e
enough capital. Sam decided to go public to raise capital. .%er all" 4hile his
competitors 4ere under the impression that Wal-Mart?s business model 4ill
not be successful" Sam has ta/en the ad%antage of the time and strategically
placed his business to gro4. Sam 4as also able to con%ince his establish an
internal culture in order ha%e e%erybody on the same boat. *his resulted in
e%eryday lo4 prices. 6e did not ha%e any sophisticated systems" 4hich
resulted in less o%erhead cost.

-urrently" Sam?s %ision has become a global company employing more
than :.L million associates 4orld4ide and nearly 7<(( stores and clubs
spanning across :; countries. I*he secret of successful retailing is to gi%e
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your customers 4hat they 4ant"I Sam 4rote in his autobiography. IAnd really"
if you thin/ about it from the point of %ie4 of the customer" you 4ant
e%erything: a 4ide assortment of good Duality merchandiseM the lo4est
possible pricesM guaranteed satisfaction 4ith 4hat you buyM friendly"
/no4ledgeable ser%iceM con%enient hoursM free par/ingM a pleasant shopping
e1perience N444.4almartfacts.comO.B

In the :8L(s" Wal-mart?s gro4th" among retailers" placed them in the
top sellers in America. -ompany sales in :8L( 4ere an all time highM those
@gures 4ere d4arfed in :8L8 by a record '7 billion in sales
N444.4almartfacts.comO. At the end of the L(?s" the company had almost
:;(( stores in e1istence. AWal-Mart Stores" Inc. branched out into 4arehouse
clubs 4ith the @rst SAMPS -lub in :8L3. *he @rst Supercenter" featuring a
complete grocery department along 4ith the 37 departments of general
merchandise" opened in :8LL. Wal-Mart had become a te1tboo/ e1ample of
managing rapid gro4th 4ithout losing sight of a company?s basic %alues. In
Wal-Mart?s case" the basic %alue 4as" and is" customer ser%ice.B
i%

N444.4almartfacts.comO


*imeline

:87(s and )(Ks
:87' Wal-Mart opened the @rst store In ogers" Ar/.
:8)( Wal-Mart opens @rst distribution center and home oCce in Benton%ille"
Ar/.
:8)( Wal-Mart traded stoc/s as a publicly held company
:8): Wal-Mart in @%e states: Ar/ansas" Jansas" 9ouisiana" Missouri and
./lahoma.
:8)' Wal-Mart appro%ed and listed on the >e4 Qor/ Stoc/ 01change.
:8)3 Wal-Mart in *ennessee.
:8); Wal-Mart stores no4 in Jentuc/y and Mississippi" *e1as is ninth state of
Wal-Mart.
:8)) Wal-Mart entered Illinois. ::th state:
Alabama. :8L(s
:8L: Wal-Mart opened at =eorgia and South -arolina
:8L' Wal-Mart opened at &lorida and >ebras/a.
:8L3 &irst SAMKS -9$B opened in Mid4est -ity" .J People =reeter
implemented at all store.
Wal-Mart enters Indiana" Io4a" >e4 Me1ico and >orth -arolina.
:8L; Da%id =lass named company president. Wal-Mart enters #irginia :8L<
Wal-Mart has LL' stores 4ith sales of RL.; billion and :(;"((( Associates.
-ompany adds stores in Wisconsin and -olorado.
:8L7 Wal-Mart enters Minnesota.
:8LL Da%id =lass named chief e1ecuti%e oCcer of Wal-Mart Stores" Inc.

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:8LL &irst Super center opened in Washington" Mo.
:7 Wal-Mart distribution centers in operation.
:8L8 Wal-Mart is no4 in '7 states 4ith the addition of Michigan" West
#irginia and Wyoming.
:88(s
:88( Wal-Mart becomes nationKs >o. : retailer.
Mc9ane -ompany of *emple" *e1as acDuired
Wal-Mart enters -alifornia" >e%ada" >orth Da/ota" Pennsyl%ania" South Da/ota
and $tah. :88: Wal-Mart enters -onnecticut" Dela4are" Maine" Maryland"
Massachusetts" >e4 6ampshire" >e4 ,ersey and >e4 Qor/.
ISamKs American -hoiceI brand products introduced.
International mar/et entered for @rst time 4ith the opening of a unit Me1ico
-ity.
:88' Sam Walton passes a4ay April <.
S. obson Walton named chairman of the board April ).



Wal-Mart has entered ;< states 4ith the addition of Idaho"
Montana and .regon.
Wal-Mart enters Puerto ico.
:883 Wal-Mart enters Alas/a" 6a4aii" hode Island and
Washington. :88; Wal-Mart enters -anada by the acDuisition of
Woolco" and ta/es o%er :'3 former Woolco stores across
-anada. It opens 87 stores in Me1ico. *hree %alue clubs open in
6ong Jong.
:88< Wal-Mart enters its <(th state - #ermont - and builds three units in
Argentina and @%e in Bra!il.
:887 Wal-Mart enters -hina
:88) Wal-Mart replaces Wool4orth on the Do4 ,ones Industrial A%erage
'(((s
'((( Wal-Mart ran/ed <th by &.*$>0 maga!ine in its =lobal Most Admired
All-Stars list. 6. 9ee Scott named president and -0. of Wal-Mart Stores" Inc.


- < -
Wal-Mart ran/ed S: -orporate -iti!en in America in the '(((
-oneToper eport" an annual national sur%ey on philanthropy and corporate
citi!enship. '((: Wal-Mart has the biggest single day sales in history: R:.'<
billion on the day after *han/sgi%ing.
'((< Wal-Mart Stores" Inc. closed out the year 4ith R3:'.; billion in sales"
4hile e1panding to more than 7"'(( facilities around the 4orld" including
3"L(( stores in the $nited States" along 4ith 3"L(( international units. Around
the globe" 4e no4 ha%e a strong presence in Argentina" Bra!il" -anada" -hina"
-osta ica" 0l Sal%ador" =ermany" =uatemala" 6onduras" ,apan" Me1ico"
>icaragua" Puerto ico" South Jorea" and the $nited Jingdom. Wal-Mart
employs more than :.7 million associates 4orld4ide. *here are more than :3L
million customers 4ho %isit our Wal-Mart stores each 4ee/ all o%er the 4orld.
%


01ternal 0n%ironment

Wal-Mart already pro%ides products categori!ed as Anegati%e category
tripsB 4ithin their super stores. -onsumer habits are not li/ely to change in
this area unless they can change buyers habits 4hich 4ill account for more
trips into their retail centers. Wal-Mart?s gro4th is partially dependant upon its
manufactures and their ability to pac/age and brand items to meet Wal-Mart?s
e%ery day lo4 price model. *his means being able to mar/et more
recogni!able brand names into Wal-Mart?s retail system" 4hich could attract
higher income shoppers. *hey ha%e an estimated L3U of total $.S. household
penetration. -ompeting retailers in specialty areas include - dollar stores"
automoti%e retailers" con%enienceTgas" home impro%ement stores" club stores
and toy stores. All of these outlets are in greater competition for Wal-Mart
trips.
%i
A*he Wal-Mart Stores segment is the largest segment of Wal-MartKs
business" accounting for 7).3U sales during the @scal year ended ,anuary 3:"
'((< N@scal '((<O. *he segment consists of three diEerent retail formats" all
of 4hich operate in the $nited States. *he -ompanyKs SAMKS -9$B segment
consists of membership 4arehouse clubs that operate in the $nited States"
and accounts for :3U of @scal '((< sales. *he international segment consists
of retail operations in eight countries and Puerto ico" and generated :8.)U
of Wal-MartKs @scal '((< sales. In addition" the -ompany o4ns an
unconsolidated minority interest of appro1imately 3)U of *he Seiyu" 9td." a
retailer in ,apan.B
%ii


Internal 0n%ironment

0conomic 0n%ironment:

V :8L(s 5 early :88(s- eras of economic uncertainty for retailers" many
retailers negati%ely aEected.
V Increased competiti%e pressures" sluggish consumer spending" slo4er
than anticipated economic gro4th.
V At the beginning of the year '(((" the $S had e1perienced one of the
longest periods of economic e1pansion in its history.
V Wal-Mart responded to changes in the mar/etplace by selling goods at
price le%els belo4
regular retail prices. Wal-Mart e%en though 4as considered as the industry
leader carried much of the same merchandise" oEered prices that 4ere
pennies apart and operated stores that loo/ almost e1actly ali/e.
- 7 -




*echnological 0n%ironment:

*o /eep 4ith the pace of technology re%olution" Wal-Mart had an
in%entory control system that 4as recogni!ed as the most sophisticated as
retailing. *hey incorporated a high speed computer system that lin/ed almost
all stores to the headDuarters and the company?s distribution centre. Most
important for management" it helped detect sales trends Duic/ly and speeded
up mar/et reaction time substantially. At the beginning of '(((" Wal-Mart set
up a separate company 4ith 4ebsite 4ith plans to go public.

Social 0n%ironment:

Wal-Mart had launched se%eral programs to highlight popular social
causes-ABuy
AmericanB" :8L<. *he theme 4as Abring it home to $SAB and its purpose 4as
to communicate Wal-Mart?s support for American manufacturing. In the
program" the @rm?s e1erted substantial inHuence to encourage to
manufacturers to produce goods in the $nited States rather than import them
from other countries. #endors 4ere encouraged to initiate the process by
contacting the company directly 4ith proposals to sell goods that 4ere made
in the $nited States. Also" WalMart 4as one of the @rst retailers to embrace
the concept of Agreen mar/etingB. *he program oEered shoppers the option of
purchasing products that 4ere better for the en%ironment in three respects:
manufacturing" use" and disposal.

Management

*he greatest strength for Wal-Mart from its start in :878 to this day has
been the %ision and dedication of the top le%el management -0.?s Da%id
=lass and current -0. 6. 9ee Scott and no one can deny Sam Walton the
founder for his great %ision that he made become crystal clear. &rom the
founding to this day Wal-Mart?s top le%el management has been stri%ing to
come up 4ith greater 4ays to bring Wal-Mart at le%el it is today and /eep it at
tops of all retailers and companies 4orld 4ide. Wal-Mart?s greatest strength
after its management is its si!e 4hich management has helped it to gro4 4ith
increasing sales and net income since :883. *he 4ay they ha%e implemented
their strategic strengths in the industry is @rst by coming up 4ith multiple
store fronts to reach all mar/ets and segments of people.

*hey ha%e created a careful strategic planning on 4here and 4hen to
open ne4 stores.
*his geographic e1pansion strategy has focused on opening out4ard into ne4
geographical areas. Wal-Mart e1pands into adFoining geographic areas"
saturating each area 4ith stores before mo%ing into ne4 territories. *his type
of strategy created synergy by doing this by clustering ne4 stores in a
relati%ely small area" Wal-Mart could spread ad%ertising e1penses for brea/ing
into ne4 mar/ets across all area stores" and a tactic the company used it used
to /eeps its ad%ertising cost at :U of sales compared to '-3U for competitors.
Wal-Mart although not the @rst but the best at e%eryday lo4 prices ha%ing L-
- ) -
')U belo4 those of such leading supermar/ets this in turn has been Wal-
Mart?s 4inning strategy against competitors in @nd all 4ays to cut cost and
create synergy through the cost cutting there for /eeping prices 4ay lo4er
than that of its competitors therefore being the most popular amongst
consumers 4hen it comes to lo4 price retailing.

Wal-Mart cut cost on many diEerent le%els but its most eEecti%e
strategy it has found it 4ith its suppliers. Its relationships 4ith its suppliers are
its main competiti%e ad%antage by ha%ing procurement management spend a
lot of time 4ith %endors and understanding there cost structure. *hus they
made the negotiation process transparent" doing all it could to cut do4n cost
and Duote
Wal-Mart an attracti%ely lo4 price. Some '(( %endors ha%e established oCces
in Benton%ille to 4or/ closely 4ith Wal-Mart on a continuing basis 4here they
are encouraged to %oice any problems in their relationship 4ith Wal-Mart and
to become in%ol%ed in Wal-Mart?s future plans. Most %endors %ie4 Wal-Mart?s
single bottom line price and its e1pectation of close coordination as a 4in-4in
proposition not only because of bene@ts of cutting out Afunny-moneyB costs
but because they learn collaborati%e eEorts and mutual data-sharing 4hich
often had tremendous bene@ts in the rest of there operations.

In e1ecuting Sam Walton?s strategic %ision of become the largest lo4
price discount retailer in the 4orld they also increased shareholder?s 4ealth
e%ery year almost @%e times more no4 in earnings per share than in :883.
Wal-Mart has been the leader in its industry and gro4th rate of more than 3'
countries because it has had many strengths but 4ith all strengths there are
4ea/nesses and although I did not see much I did see that Sam?s club 4as not
at the top of its game as all there rest of the other store fronts. -ostco the
main competition to Sam?s clubs is o%er performing Sam?s club 4ith fe4er
stores and is the nation?s biggest retailer of the @ne 4ines N7((millionO.

As for opportunities and threats there are many opportunities and
threats for Wal-Mart. .ne is to clean up its recent public image and try to @ght
or settle the 7((( la4suits it is facing right no4. A*he la4 suites range from
anti-trust and consumer issues to tort claims. A couple of la4suits ha%e
potentially serious conseDuences li/e the alleging the company discriminates
against 4omen" 4hich has potential to turn into the largest se1-bias class
action e%er.B
%iii
WalMart also has the threats of ha%ing management put out
brush@res instead of trying to gro4 and operate the business. All the threats
Wal-Mart can use as opportunities to sho4 the public that it is not a se1-bias
company and e1uberate 4hat Sam Walton had 4hich 4as care for the
community and all of his employees.


Porter?s &i%e &orces frame4or/

Potential entrants - Wal-Mart does not ha%e to 4orry about threat to
ne4 entrants because of high barriers of entry for companies aspiring
to come into the retail industry.

Bargaining po4er of buyers - Buyers do not ha%e to bargain 4ith Wal-
Mart for lo4 prices and higher Duality or more ser%ices because Wal-
Mart has already established the lo4 prices" higher Duality" and more
- L -
ser%ices philosophy. Wal-Mart has many pricing philosophies including
A0%ery Day 9o4 PriceB" Aollbac/B" and ASpecial BuyB to ensure that
their customers get the lo4est price possible. Also Wal-Mart does allo4
customers to match prices from its ri%als by sho4ing coupons from its
ri%als and 4ill honor that price if it?s lo4er than theirs

Bargaining po4er of suppliers - Wal-Mart hand pic/s its suppliers and
has a good and long standing relationship in order to maintain their
pricing philosophies" e%ery day lo4 prices" roll bac/" 5 special buy" Wal-
Mart?s suppliers also /no4 that they supply ha%e to be good Duality
products. Wal-Mart 4ill not sell something that is not to their
satisfaction. Also suppliers are put into a tight spot 4here they ha%e to
play by the rules set up by Wal-Mart or loose their contracts they are
forced to redesign e%erything from pac/aging to e%en sometimes
telling them 4hat it 4ill pay for their goods.

*hreat of substitute products and ser%ices - *he ability of Wal-Mart to
oEer the cheapest products that meet both Duality and its price
standards ensures that it 4ill not incur the
threat oE substitute products from its ri%als cause they are able to
meet the customers product satisfaction. Wal-Mart has an e1cellent
customer ser%ice. 0%erything possible is done to ensure that shopping
at Wal-Mart 4ill be a friendly e1perience. Wal-mart 4as founded on ;
basic beliefs that all Wal-mart employees must adhere to 4hich are"
Arespect for the indi%idual" e1cellence in the 4or/place" customer
ser%ice and al4ays ha%ing the lo4est pricesB. Wal-Mart ta/es these ;
Basic Beliefs %ery seriously.

*he intensity of ri%alry among competitors in an industry - Due to Wal-
Marts si!e" domination in its industry there is no intensity of ri%alry
among Wal-Mart and its competitors in the retail industry because Wal-
Mart e1cels in this sector and the others li/e Jmart seem to be
struggling to stay aHoat" *arget is not e%en half the si!e of WalMart so
they don?t seem to be ha%ing that big of threat by their ri%als. >o
competitor can beat Wal-Mart?s Ae%ery day lo4 priceB so that gi%es Wal-
Mart a distinct ad%antage o%er their ri%als.


Intellectual Assets

Wal-Mart has not de%eloped any real intellectual assets on its o4n. It
has ho4e%er incorporated other company?s assets to gain strategic success in
the retailing industry. What this means is that Wal-Mart has ta/en and
implemented &ID technology to a le%el that no other retailer at the time has
done. *hey too/ internal I* departments and implemented it in e%ery store
location around the 4orld" lin/ed the information to their 4arehouses and
made the net4or/ a real-time net4or/. *his is discussed later. *heir real
Intellectual Assets are those of other organi!ations all collaborated to one to
propel Wal-Mart into history as the largest" fastest gro4ing and dominating
retailer that it is today.

Strategic &ormulation
- 8 -

Business 9e%el Strategies

Wal-Mart?s competiti%e ad%antage in the 4orld of retailing is
greatly attributed to their strategic focus on %alue chain acti%ities. 0Ccient
and inno%ati%e use of inbound and outbound logistics and mastery of comple1
management operations 4ith large economies of scale ha%e made it diCcult
for many retailers to imitate the %alue Wal-Mart has supplied to the 4orld of
discount retailing. &rom establishing their o4n logistics operations" complete
4ith their o4n Heet of truc/s and a pri%ate satellite system to successful
management of comple1 cross-doc/ing strategies at o%er :8 4holly o4ned
distribution centers" their eCcient utili!ation of %alue chain acti%ities has
made its mar/ in the 4orld of Wlo4 cost? global retailing.

Wal-Mart reali!ed %ery early on that the typical models of %alue chains in
discount retailing in%ol%ing cost control" eCciency in distribution and
purchasing and lo4 o%erhead-facilities 4as not going to be enough to
compete for a %aluable mar/et share. *hey needed a strategy that 4ould
mo%e products from location to location Duic/ly" eCciently and often 4ithout
e%er ta/ing it into in%entory @rst. *he logistics techniDue of cross doc/ing
oEered such an ad%antage and has since been a central feature in Wal-Mart?s
%alue chain acti%ities. Instead of 4asting time in 4arehouse in%entory" cross
doc/ing is the practice of reducing handling costs by recei%ing ne4
merchandise" selecting" repac/ing and distributing it across one loading doc/
to another as Duic/ly as possible. Although eCcient in use" cross-doc/ing is
e1tremely diCcult to manage and operate eEecti%ely. &or this reason Wal-
Mart?s ability to implement and manage cross-doc/ing strategies pro%ides a
central ad%antage to their logistics operations reducing the cost of sales by '
to 3 percent compared to its competitors. Since merchandise comes and
goes from their 4arehouses so Duic/ly they needed an eEecti%e in%entory
control system. adio &reDuency Identi@cation N&IDO oEered the ability for
Wal-Mart to digitally monitor its shipments to-andfrom its 4arehouses and
eCciently manages its supply chain 4ithout hindering the eEecti%e use of its
cross-doc/ing strategies.

Wal-Mart?s Information Systems NISO strategy is a central force in bringing all
operations and logistics of its %alue chain together. *heir IS strategy consists
of three basic principles: -entrali!ed IS for operations all o%er the 4orld"
common systems and platforms across the entire organi!ation" and Abe
merchants @rst and technologists second.B Wal-Mart 4as the earliest
adopters of supply chain soft4are in the retail industry. *oday their
application infrastructure allo4s a scan to automatically signal replenishment
of stoc/" trigger a payment and adFusts in%entory le%el. *herefore" suppliers
/no4 4hat is selling 4ith up to the minute statistics. *hrough application and
maintenance of this technology" a connection 4as made beyond that at the
store le%el" by analy!ing that data as a mission critical reDuirement they are
able to corner the supply-in-demand eDuation and set them apart from their
competition.

.ne of Wal-Mart?s pitfalls in its %alue chain is in its customer ser%ice. *hey
ha%e ta/en a step in the right direction by implementing interacti%e online
tools" clearly de@ned their return policies" noti@cation of product recalls" and
encouraged of feedbac/ from its customers. 9e%eraging buyer /no4ledge
through ad%anced customer relationship management N-MO automation
allo4s WalMart to build stronger customer pro@les. *his allo4s Wal-Mart to
- :( -
meet customer?s demands by /eeping shel%es stoc/ed 4hile maintaining its
lo4 price credo.

NA full outline of Wal-Mart?s #alue -hainO




-ompetiti%e Ad%antages 5 Sustainability

*hrough its eCcient use of cost reducing %alue chain acti%ities and
large economies of scale Wal-Mart?s competiti%e ad%antage oEers them a
signi@cant position in o%erall lo4 cost leadership by pro%iding a strong
industry-4ide lo4 cost position. With aggressi%e construction of sole-o4ned
eCcient 4arehouse facilities" /no4ledge gained through e1perience of cost
reduction and o%erhead control in its %alue chain" Wal-Mart is the model of
lo4-cost leadership industry 4ide. *heir inability to combine ad%antages by
implementing a uniDue di%ersi@cation strategy on top of their already
successful lo4 cost model has inhibited them from broadening their product
- :: -
oEerings and increasing their mar/et share. By oEering one-stop shopping of
groceries" electronics" la4n and garden" clothing" opticalT%ision care"
pharmaceuticals and no4 health and medical facilities" Wal-Mart can assure
its customers a con%enient shopping e1perience at lo4 prices guaranteed. By
combining the diEerentiation of its di%erse products and ser%ices Wal-Mart
challenges all of its competitors. =rocery chains" optical shops and
pharmacies must no4 all fell the impact of mar/et share 4hen a ne4 Wal-Mart
comes to to4n.

*he ole of IS in Wal-Mart?s Business 9e%el Strategy

Information Systems ha%e played a /ey role in Wal-MartKs management of its
business le%el strategies. By de%eloping ne4 systems that increase
performance and reporting they utili!e the bene@ts of le%eraging their human
capital. By utili!ing buyer /no4ledge information systems allo4 Wal-Mart to
build customer pro@les from 4hich they can determine ho4 best to stoc/ their
stores. *his type of 4ell-de@ned -M business process has helped propelled
Wal-Mart to its leadership position. By positioning their I* professionals in
central roles in Wal-Mart?s organi!ation it is able to de%elop internal systems
that are more inline 4ith the company?s %ision.

- :' -





AIn any de%elopment eEort" our XISY people are e1pected to get out and
do the function before they do the system speci@cation" design or
change analysis. *he /ey there is to do the function" not Fust obser%e it.
So 4e actually insert them into the business roles. As a result" they
come bac/ 4ith a lot more empathy and a 4hole lot better
understanding and %ision of 4here 4e need to go and ho4 4e need to
proceed.

WeK%e learned some hard lessons in our stores" clubs and distribution
centers 4hen 4e de%eloped something and people didnKt use it" and
they chose to @nd other 4ays to get the Fob done. We are 4or/ing hard
to de%elop systems that are easy to use. *hat puts an a4esome
responsibility on that de%eloper to get out and understand the
business. *hatKs one of our /ey things: WeKre merchants @rst"
technologists second.B

Wal-Mart -I. Je%in *urner



-orporate 9e%el Strategy

Wal-Mart?s operations range in scope and are comprised primarily in
three retailing subsidiaries: Wal-Mart Stores Di%ision $.S." Sam?s club and Wal-
Mart international. 0ach of their di%isions is bro/en do4n into three types of
shopping e1periences for their customers: Discount Stores ranging in si!e
from 8/ to o%er '((/ sDuare feet" >eighborhood mar/ets comprised li/e the
typically supermar/et and Sam?s club?s oEering sales of bul/ items to it
members. Although Wal-Mart international consists of '")(( stores in :;
countries outside the $nited States 7).'U of its @scal sales in '((7 4ere
comprised of its large $.S. di%ision. WalMart?s mar/eting has changed %ery
little since its inception concentrating on t4o main principles A9o4 prices sa%e
you moneyB and AAl4ays lo4 prices" al4aysB. Shared %alues at Wal-Mart seem
to be" e1pand and o%erta/e any and all other competition" no matter the
costs. Ma/e more money - at 4hate%er costs e%en if aEects public image and
the public perspecti%e of the organi!ation. Management at the store and
- :3 -
distribution le%els are forced by upper management to push restraints and
massi%e Agro4thB restrictions on internal employees.

Social -apital

As e1ecuti%es of Wal-Mart push to ma/e a Acheaper" more He1ible 4or/force
by capping 4ages" utili!ing more part time 4or/ers and scheduling more night
and 4ee/end shifts"B they are attempting to Abetter ser%e there customers by
deploying 4or/ers more eEecti%ely during pea/ shopping hours.B *hrough
programs li/e: .Cce of Di%ersity" -orporate -ompliance" ealignment of Fob
-lassi@cations 5 pay structures" and the implementation of the career
preference systemM Wal-Mart attempts to sol%e the publics %ie4s and
concerns 4ith its social capital.

.Cce of Di%ersity

*he goal of this department is to implement programs that de%elop pools of
Duali@ed di%erse candidates. In essence to ma/e sure that the percentage of
Duali@ed minorities and 4omen they promote is eDual to the percentage 4ho
apply. N&inancial compensation based upon the measurement of success in
each region is used to re4ard oCce-le%el management reach the underline
goals of this program.O

-orporate -ompliance

*he goal of this department is o%erseeing compliance of obligations of
associates in terms of pay" 4or/ing hours and time for brea/s. *he
department is utili!ing ne4 technology as its main focus to automate its
obligations and place chec/s and balances on its managers and employees.



,ob -lassi@cation 5 Pay Structure

Wal-Mart employed an outside consulting @rm ?6ay =roup? to e%aluate each of
its positions based upon se%eral criteria: /no4ledge" problem sol%ing and
accountability. *hey oEered a fresh unbiased approach to ensure fair mar/et
%alue for each of its positions and they cross-referenced each positions pay
scale against the competiti%e pay of similar retailers.

-areer Preference System

0mployees are encouraged to participate in a career preference system. All
participants" if Duali@ed can specify responsibilities and geographic criteria
and be noti@ed automatically if current opportunities are a%ailable nation-
4ide. *his eEort is to enhance its Fob posting system and ensure eligible
associates ha%e eDual opportunity to /no4 about and apply for open
management positions.

Wal-Mart?s 9ife -ycle

- :; -
Wal-Mart has continued to gro4 at an e1traordinary rate compared to the rest
of the retail industry. *he increase 4as considered moderate at @rst" but 4ith
the e1ception of the slo4 rise in the mid-nineties" their gro4th has propelled
them into an intense international and domestic mar/et. With a high %alue on
lo4-cost leadership" intense mar/et gro4th" and some concern of increasing
competition" Wal-Mart has reached the maturity stage of its life cycle. *his
forces them to build upon their e1isting %alues and %ision statement to
o%ercome public scrutiny and competition. Successful ne4 %entures into
international mar/ets such as Me1ico" -anada" and South America as 4ell as
further e1pansion into India" -hina and 0urope has been a increasingly
important part of continuing to maintain their mar/et position 4ithout
e1periencing another do4nturn li/e that of the mid-nineties.


International Strategy

-onsidering Wal-Mart?s current domestic position pro%ides %ery little
gro4th in its mature life cycle stage" signi@cant gro4th in sales and pro@ts
seemed only possible in international mar/ets. With an already saturated
domestic mar/et" consisting of only a small ;U of the 4orld?s population"
emerging international mar/ets 4ith increasing technology cultural
homogeni!ation and lo4ered trade barriers oEered huge platform ad%antages
for gro4th in discount retailing internationally. Although international
e1pansion came 4ith a fair amount of ris/s their one-si!e-@ts-all mentality
posed increasing pressure for adaptation in its international mar/ets. Some of
these ris/s are: customer loyalty" local adaptation" and preferences to mar/et
demands. Wal-Mart determined their e1pansion strategy had to consist of a
series of corporate buyouts" ta/eo%ers" or Foint %entures N,#O in order to gain
successful entry into many of its international mar/ets. With pressure to /eep
the strategic position of o%erall cost leadership coupled 4ith strong local
adaptation to customer demands it sent Wal-Mart into a *ransnational
Strategy. In this stage Wal-Mart must try to reduce costs and adapt to its ne4
local mar/ets. By approaching international mar/ets 4ith sole-o4ned
subsidiaries and buyout approach they eliminated their competition and
gained huge ad%antages in its targeted mar/ets.

- :< -



Digital Business Strategies Z A444.4almart.comB

Walmart.com is passionate about combining that best of t4o great
4orlds Z technology and dominating retailing Z to gi%e customers a great
online shopping e1perience. By e1panding ser%ices to include in store pic/up
and no hassle returns at any location" Wal-Mart sustains a competiti%e
ad%antage in its approach by oEering on-site ser%ice to aid its Internet sales.
Although Wal-Mart has the ability to oEer a competiti%e ad%antage on the 4eb
the threat of substitutes 4ithin their lo4-cost strategy emerge as customers
ha%e access to an abundance of ne4 lo4-cost alternati%es in this digital
en%ironment. In order to compete in the digital mar/etplace Wal-Mart has
adFusted many of its ser%ices to ma/e it easier to search for particular
products and get all the information needed to ma/e an educated decision
based upon: price" brand name" and a%ailability. In order to ma/e sure that
transaction acti%ities are monitored customers are noti@ed of arri%al dates
and oEered se%eral shipping options to choose from or the option to pic/ the
product up at any store location. *he online customer ser%ice 4ill allo4
customers to ans4er Duestions regarding: ho4 to create an account" ful@ll an
order" trac/ order" ad%ise on shopping tips and e%en email suppliers for
a%ailability updates. *his digital e1perience allo4s any customer 4ithin
shipping range to purchase merchandise from 4almart.com.

Strategic Implementation

Strategic -ontrol

Wal-Mart is a company that in essence appears to operate 4ithin the
realm of the traditional approach to strategic controls. By this I mean the
management formulates strategies" sets goals" implements those strategies"
and measures them against their predetermined goals. *he feedbac/ recei%ed
comes in many forms" but the most utili!ed resource is the numbers
generated by each store and the for4arded to corporate headDuarters
- :7 -
through its %ast digital net4or/. In an e1cerpt from case study conducted by
the *uc/ School of Business at Dartmouth" A0ach store constituted an
in%estment center and 4as e%aluated on its pro@ts relati%e to its in%entory
in%estments. Store-le%el data on sales" e1penses" and pro@t and loss 4ere
collected" analy!ed" and transmitted electronically on a real-time basis. *he
data could be analy!ed by region" district" store" department 4ithin a store" or
e%en at the le%el of an item 4ithin a department.B
i1
It is this system that Wal-
Mart basis some of its decisions on almost a daily basis as to 4hether or not
they should adFust their strategies. *his 4ould imply that to a certain e1tent
Wal-Mart operates 4ith a contemporary approach because each of the four
characteristics are reali!ed and acted upon almost on a daily basis.

It 4asn?t al4ays this simple" bac/ before the implementation of computers
Wal-Mart used ledgers to trac/ this data. *he principle of trac/ing pre%ious
year?s data or forecasting as it is called no4 4as something that Sam Walton
instilled in his store managers. Sam Walton 4ould instill responsibility 4ithin
his department managers and hold them accountable. *his approach 4as not
4ithout re4ard. By allo4ing his associates and managers to be creati%e" those
same principles or best practices 4ere emulated into other stores. It 4as this
/ind of thin/ing that lead to ne4 strategies and inno%ations for Wal-Mart. *his
creati%e process 4hich 4as started by Sam Walton 4as a dri%ing force in the
creation of Wal-Mart?s culture. In light of 4hat Sam Walton?s original strategy
and 4here Wal-Mart is today there is a gap that e1ists bet4een the company
and its associates. *he controls that are no4 being implemented do not align
4ith the original concepts as outlined by Sam. Areas such as employee
turno%er create gaps in learning 4hich can cause inadeDuate response times
4hen it comes to customers and the stores they ser%ice. Much of the turno%er
can be attributed to poor 4ages" less than adeDuate health bene@ts and
4or/ing conditions that ha%e come under @re in recent years. All of these
items signal trouble 4hen it comes to promoting a @rst class en%ironment. If
the associates don?t feel li/e they are being ta/en care of then that directly
eEect the company and it customers.

Attaining Beha%ioral -ontrol

AQears ago" Sam Walton challenged all Wal-Mart associates to practice
4hat he called Iaggressi%e hospitality.I 6e said I9etKs be the most friendly -
oEer a smile of 4elcome and assistance to all 4ho do us a fa%or by entering
our stores. =i%e better ser%ice - o%er and beyond 4hat our customers e1pect.
Why notG Qou 4onderful" caring associates can do it and do it better than any
other retailing company in the 4orld . . . e1ceed your customersK
e1pectations. If you do" theyKll come bac/ o%er and o%er again.I
Nhttp:TT444.hrdm.netTenT4al-mart.htmO. *his statement outlines the basic
principles that Sam Walton 4anted to instill 4ithin the organi!ation as a
4hole. =etting his employees to adopt this philosophy 4asn?t hard because
one of the @rst things Mr. Walton did 4as brea/do4n a traditional barrier of
employer and employee. Walton learned long ago through his o4n
employment at ,.-. Penny that ma/ing the employee apart of the company
and creating responsibility 4as through their designation as associates. *his
approach pro%ided a sense of o4nership in e%erything they did. It also laid
the frame4or/ for his customer ser%ice principles and Wal-Mart?s success.
0%erything centered on deli%ering the lo4est possible price and pro%iding the
best possible customer ser%ice. *his formula 4or/ed for Wal-Mart and as an
incenti%e" but not 4ithout a little pressure Walton implemented a pro@t
sharing plan in :8):.

- :) -
*he current pro@t sharing plan 4or/ li/e this. I0%ery associate that has
4or/ed for the company for at least one year and 4ho 4or/s at least :"(((
hours a year is eligible to ha%e about si1 percent of their 4ages put into their
personal plan. When they lea%e the company" they ta/e 4hate%er is in their
plan - in cash or Wal-Mart stoc/.B NMichael -lar/O *his plan has 4or/ed 4ell for
the associates 4ho stayed beginning in the early stages of the program but it
is not in line 4ith 4hat the company?s strategy is today. Wal-Mart?s goal to
dominate the etail Mar/et does not come 4ithout a cost. *he continued dri%e
to dri%e prices lo4er impacts far more than Fust the associates 4or/ing for
them. *here are e1ternal costs to the ta1 payers for the lo4 4ages that Wal-
Mart pays to its employees. AA May '((; study released by the $ni%ersity of
-alifornia" Ber/eley entitled A*he 6idden Public -osts of 9a4-4age ,obs in
-aliforniaB identi@es lo4 pay in retail as a serious cost to the public.
Inter%ie4s 4ith one of the study?s authors identi@ed WalMart as costing
-alifornia?s ta1payers RL7.( million annually as a result of under-paying its
0mployees.B
1
Wal-Marts current plan is to reduce full time employees do4n to
forty pre%ent of its o%erall 4or/ force. With a common practice of considering
employees 4ho 4or/ o%er t4entyeight hours a 4ee/ as full time" there is
considerable amount of gain to be made by the company for ta/ing this /ind
of measure" but there is greater loss associated 4ith it as 4ell in terms of loss
of e1perienced employees. It is issues such as these that ha%e slo4ly eroded
the culture that once dominated Wal-Mart?s internal landscape. *here 4as a
philosophy that Sam Walton started called *he Sundo4n ule" A4e respect our
customers" Associates and suppliers and stri%e to treat them as 4e oursel%es
4ant to be treated. In building and nurturing these relationships" as 4ell as
ser%ing the communities 4here 4e li%e" 4eK%e helped build a better business-
one committed to e1cellence.B .nly a portion of this statement truly reHects
the operating en%ironment that is WalMart today. -apturing this philosophy in
4hole" not in part is 4hat could help to recapture the culture that some ha%e
said 4as cult li/eB





-orporate =o%ernance

*he Duali@cations for members of the board of directors are as follo4s. *he
board 4ill ha%e a maFority of directors 4ho meet the criteria for independence
reDuired by the >e4 Qor/ Stoc/ 01change. >ominees for director 4ill be
selected on the basis of outstanding achie%ement in their personal careersM
broad e1perienceM 4isdomM integrityM ability to ma/e independent" analytical
inDuiriesM understanding of the business en%ironmentM and 4illingness to
de%ote adeDuate time to Board duties. Directors 4ill be shareholders" holders
of options granted under the -ompany?s stoc/ option plan" or 4ill elect to
recei%e compensation in the form of stoc/ units under the Director
-ompensation Plan.

*he responsibility of the directors is to e1ercise their business Fudgment" and
to act in 4hat they reasonably belie%e to be in the best interests of the
company" its shareholders" and to perform their duties of care and loyalty. In
discharging that obligation" directors should be entitled to rely on the honesty
and integrity of the company?s senior e1ecuti%es and its outside ad%isors and
auditors" to the fullest e1tent permitted by la4. Directors are e1pected to
ser%e on Board committees. *he Board 4ill meet at least four times per year
- :L -
and 4ill hold additional meetings 4hen needed to address issues of special
concern or urgency.

*he Board 4ill ha%e at all times an Audit -ommittee" -ompensation"
>ominating and
=o%ernance -ommittee" an 01ecuti%e -ommittee" a Stoc/ .ption -ommittee
and a Strategic Planning and &inance -ommittee. 0ach committee 4ill ha%e
their indi%idual charter. *he charters 4ill set forth the purposes" goals and
responsibilities of the committees as 4ell as Duali@cations for committee
membership" procedures for committee member appointment and remo%al"
committee structure and operations and committee reporting to the Board.

Directors ha%e full and free access to oCcers and other associates of the
-ompany and the -ompany?s outside ad%isors. At least once per year
management 4ill report to the Board regarding management de%elopment
and succession" including di%ersity initiati%es and progress and long-term
strategic planning. Inclusion of the -0. and other e1ecuti%es on the Board
pro%ides the Board 4ith information and insight about the -ompany. .ther
e1ecuti%es may attend Board meetings or committee meetings at the
in%itation of the -hairperson of the Board or the -0. to pro%ide information
and insight to the Board.

*he form and amount of compensation of the director 4ill be determined by
the follo4ing committees: -ompensation" >ominating and =o%ernance
-ommittee in accordance 4ith the policies and principles set forth in its
charter and applicable legal and regulatory guidelines. 0ach ne4 director
must participate in the -ompany?s .rientation Program" 4hich should be
conducted 4ithin t4o months after a director is @rst elected to the Board. *his
orientation 4ill include familiari!ing ne4 directors 4ith the -ompany?s
strategic plans" its signi@cant @nancial" accounting and ris/ management
issues" its compliance programs" its Statement of 0thics" its principal oCcers"
and its internal and independent auditors. *he -ompensation" >ominating and
=o%ernance -ommittee 4ill conduct an annual re%ie4 of the -0.?s
performance" as set forth in its charter. *he Board 4ill re%ie4 the
-ompensation" >ominating and =o%ernance -ommittee?s report in order to
ensure that the -0. is pro%iding the best leadership for the -ompany in the
long- and short-term.

*he -ompensation" >ominating and =o%ernance -ommittee should ma/e an
annual report to the Board on succession planning. *he entire Board 4ill 4or/
4ith the -ompensation" >ominating and =o%ernance -ommittee to nominate
and e%aluate potential successors to the -0.. *he -0. should at all times
ma/e a%ailable his or her recommendations and e%aluations of potential
successors" along 4ith a re%ie4 of any de%elopment plans recommended for
such indi%iduals.


-ommittee -harters - A$DI* -.MMI**00
N:O Assist the Board in monitoring:
NaO*he integrity of the @nancial reporting process" systems of
internal controls and @nancial statements and reports of the
-ompany"
NbO*he performance of the -ompany?s internal audit function"
and
- :8 -
NcO*he compliance by the -ompany 4ith legal and regulatory
reDuirementsM N'O Be directly responsible for the appointment"
compensation and o%ersight of the -ompany?s independent
auditor employed by the -ompany for the purpose of
preparing or issuing an audit report or related 4or/ Nthe
A.utside AuditorBO.

-.MP0>SA*I.>" >.MI>A*I>= A>D =.#0>A>-0 -.MMI**00
N:O Discharge the BoardKs responsibilities relating to the
compensation of the -ompanyKs directors" e1ecuti%e oCcers and
associatesM
N'O Assist the Board in the implementation of sound corporate
go%ernance principles and practices.
0+0-$*I#0 -.MMI**00
*he 01ecuti%e -ommittee is appointed by the Board to e1ercise the
po4ers and duties of the Board bet4een Board meetings and 4hile the Board
is not in session" and implement the policy decisions of the Board.

S*.-J .P*I.> -.MMI**00
*he Stoc/ .ption -ommittee Nthe A-ommitteeBO is appointed by the
Board of Directors Nthe ABoardBO of Wal-Mart Stores" Inc. Nthe A-ompanyBO to
administer certain of the -ompany?s eDuity-based compensation plans 4ith
respect to eDuity-based compensation a4ards granted to associates 4ho are
not directors or oCcers subFect to the pro%isions of subsection :7NaO of the
Securities 01change Act of :83;" as amended.

S*A*0=I- P9A>>I>= A>D &I>A>-0 -.MMI**00
*he Strategic Planning and &inance -ommittee Nthe A-ommitteeBO is
appointed by the Board to re%ie4 and analy!e @nancial matters and assist the
Board in long-range strategic planning.

.rgani!ational Design
[ Wal-Mart Stores - Super -enters
[ >eighborhood Mar/ets
[ SAMKS -lubs
[ Wal-Mart International -
[ Walmart.com -
[ Wal-Mart Pharmacy Z [ Wal-Mart .ptical
[ *he *ire 5 9ube 01press Di%ision
[ Alas/a Bush Shopper
[ Wal-Mart $sed &i1ture Auctions
0ach di%ision may containNsO all or some of these departments
A%iation 5 *ra%elM -MI 5 Bene@tsM -orporate AEairsM &inanceM Independent
Doctors of
.ptometryM Information Systems Di%isionM 9egalM Merchandising 5 Product
De%elopmentM .perationsM PharmacyM ealtyM eplenishment

Wal-Mart?s Matri1 .rgani!ational Structure:
- '( -
9eadership: -urrent Strategy
In ,anuary of '(() Wal-Mart announced its A.ut in &rontB campaign. *he plan
outlines transformations that are ta/ing place 4ithin the company as apart of
their current strategy. 0ach of the areas addressed 4ithin the conte1t of the
plan are areas that Wal-Mart has struggled 4ith or come under @re for not
addressing. *he plan consists of @%e pillars and is modeled after Sam Walton?s
ad%ice of staying out in front. *hree of the @%e pillars outlined 4ithin this
strategic plan address current" high pro@le issues that e1ist 4ithin the internal
and e1ternal en%ironment of Wal-Mart. *he three areas of most importance
center on their appeal the customers" a better place to 4or/" and the
impro%ement of business operating eCciencies. 0ach of these areas ha%e
- ': -



Determining a
Direction

Designing the
.rgani!ation

>urturing a
-ulture dedicated
to e1cellence and
ethical beha%ior
been the core focus of e1ternal entities loo/ing to attac/ the company. Wal-
Mart seems to be trying to address those areas" and display an attitude of
listening and caring.

Broadening .ur Appeal to All of .ur -ustomers

AMore in-depth mar/et research is helping us understand our customers
better. We are communicating more directly 4ith them through ne4 ads on
tele%ision and ne4 signage in our stores. And our AStore of the -ommunityB
approach helps us better ser%e the speci@c needs of our customers. We are
demonstrating this in our merchandise mi1 and in our store designs. WalMart
stores are becoming an e%en truer reHection of the communities 4e ser%e.B
NWal-Mart A.ut in &rontO

Becoming an 0%en Better Place to Wor/

APeople 4ant Wal-Mart Fobs. *here?s no better e1ample of this than our
0%ergreen Par/ Store in -hicago" 4here '<"((( people applied for Fust 3'<
Fobs. People 4ant Wal-Mart Fobs because 4e pay competiti%e 4ages and
associates ha%e the opportunity to ad%ance. More than three-fourths of our
store managers started as hourly associates. We also oEer health bene@ts
that are aEordable and accessible and pro%ide @nancial security from
catastrophic medical e1penses. 0%ery associate - both full-time and part-time
-- can become eligible for health care that costs R'3 per month. And for a cost
of Fust <( cents more per day" their children can get co%erage too.B
1i


Impro%ing Business .perations and 0Cciency

A.ur goal is to ha%e the right product" in the right place" right 4hen our
customers need it. So 4e?re shortening the time it ta/es for merchandise to
go from our suppliers to our customers. We are eliminating in%entory on
shel%es that are out of the reach of customers. And 4e are ma/ing sure our
aisles are clear of clutter. *hese in%entory impro%ements -- combined 4ith the
outstanding 4or/ of our logistics team -- mean a better customer e1perience
in our stores.B
1ii


Dri%ing =ro4th in .ur International Business

A*oday Wal-Mart operates in :; countries" up from :: last year. .f the nearly
7(( stores 4e plan to open this year" more than a third of them 4ill be
international. We are also interested in ne4 mar/ets opening up" li/e India.
With each store 4e open" our company has the opportunity to learn and gro4.
,ust as important" 4e oEer 4or/ing men and 4omen e%ery4here the
opportunity to impro%e their Duality of life.B
1iii




Ma/ing $niDue -ontributions to -ommunities

AWe donated more than R';< million to charity in '((<" 4ith the maFority
targeted locally. We?re increasing the number of in-store health clinics" 4hich
- '' -
bring aEordable and accessible health care to 4or/ing families and a high
number of the uninsured. We?re also becoming more en%ironmentally friendly
by selling organic products" minimi!ing 4aste and conser%ing energy.
-orporations can be more eCcient and more en%ironmentally friendly at the
same time. And 4e are pro%ing that at Wal-Mart.B
1i%

IMP90M0>*I>= *60 #ISI.>
When Sam Walton began the company he en%isioned a company that 4ould
ta/e care of the customers by oEering them 4hate%er they 4anted. 6e also
understood that ser%ice to these customers 4as paramount and to ta/e care
of the customers you also need to ta/e care of the associates. *he early
stages of his customer ser%ice principles helped to gro4 the company far
beyond e%en his o4n e1pectations. Walton?s %ision for gro4ing the company
further gre4 out of his basic principles" and 4hat he called his ten rules for
building a business. 0ach of these rules de@ned a speci@c area. If addressed
properly and in the manner that he en%isioned the s/y 4as the limit.
*he @rst rule 4as committing to your business. *his 4as Walton?s 4ay of
telling associates that if you approach your Fob 4ith passion" the attitude
4ould become contagious throughout the organi!ation. *his approach
apparently 4or/ed because the company reaped considerable gains in the
early nineties. Another aspect that he preached re%erently 4as sharing the
pro@ts 4ith the associates. Walton understood that none of the successes
e1perienced by the company 4ould ha%e been possible 4ithout the hard 4or/
of his associates. Sharing that success 4as part of recogni!ing those eEorts.
.f the ten rules Sam instilled" these t4o 4ere his most important and had
considerable 4eight on 4hat the culture 4as about 4hen Sam Walton 4as
ali%e. ules @%e and se%en represent the missing elements of 4hat is
currently occurring 4ithin Wal-Mart. 9ac/ of appreciation for associates and
lac/ of communication.
1%

ule <

AAppreciate e%erything your associates do for the business.B

AA paychec/ and a stoc/ option 4ill buy one /ind of loyalty. But all of us li/e to
be told ho4 much somebody appreciates 4hat 4e do for them. We li/e to
hear it often" and especially 4hen 4e ha%e done something 4eKre really proud
of. >othing else can Duite substitute for a fe4 4ellchosen" 4ell-timed" sincere
4ords of praise. *heyKre absolutely free -- and 4orth a fortune.B
1%i


ule )

A9isten to e%eryone in your company.B

And @gure out 4ays to get them tal/ing. *he fol/s on the front lines -- the
ones 4ho actually tal/ to the customer -- are the only ones 4ho really /no4
4hatKs going on out there. QouKd better @nd out 4hat they /no4. *his really is
4hat total Duality is all about. *o push responsibility do4n in your
organi!ation" and to force good ideas to bubble up 4ithin it" you must listen to
4hat your associates are trying to tell you.B
1%ii

ADe%eloping a 9earning .rgani!ationB
- '3 -
AWal-Mart has al4ays tried to instill and maintain a learning en%ironment.
&rom the %ery moment that an employee begins 4or/ing at Wal-Mart they are
put through customer ser%ice training" on the Fob training and ongoing formal
training of Fob responsibilities. In the beginning" customer ser%ice and the ten
foot rule 4ere the dri%ing forces to the associate?s indoctrination into the Wal-
Mart culture.B
1%iii
Walton belie%ed in associates at e%ery le%el ha%ing the
opportunity to ma/e suggestions" some of 4hich 4ere adopted and spread
throughout the company stores. *his e1empli@ed his desire to empo4er
employees at all le%els to ha%e and impact on the organi!ation.
In addition to these opportunities" AWal-Mart oEers reimbursement to
employees for boo/s" classes and tests for successful completion of their
=0DB
1i1
. In addition to this resource" the company oEers a ser%ice called My
0ducation -onnection. *hrough this resource" AWal-Mart has created
partnerships 4ith selected online education pro%iders. Some of these
pro%iders are 4ith accredited national institutions and uni%ersities 4ith special
pricing passed on to associates.B
11

Wal-Mart is acti%e in recruiting through the college ran/s as part of their
ongoing di%ersi@cation programs. *he utili!ation of internships is another
asset that Wal-Mart implements to further strengthen their ran/s and bring in
talent.
Managing Inno%ation
Wal-Mart?s continuing process of e%ol%ing its distribution channels is a
testament to their inno%ation in this @eld. *heir adoption of &ID Nadio
&reDuency Identi@cationO technology is meant to further strengthen their
ability to get products to their consumers. *his technology 4ill allo4 Wal-Mart
to begin trac/ing shipments the moment items lea%e the manufacture" into
their distribution channel" onto the store" and oE the shelf to the consumer.
*he o%erall impact has not been fully reali!ed as of yet but the long-term
aspect is that it 4ill sa%e the company millions in operational costs. In
addition to this step to4ards inno%ation" Wal-Mart?s commitment to4ards the
en%ironment and the impact it has on it is another inno%ation process that is
in the early stages of implementation. *he approach is this concept is reali!ed
through their ASustainable #alue >et4or/sB
11i
" 4here e%erything from
rene4able energy" 4aste reduction and sustainable products are all areas that
are being monitored and radically changed to bene@t the company"
en%ironment and the consumer.

.pportunities and >e4 #entures

Some of the opportunities that Wal-Mart has passed are due to the lac/ing of
them no panning out. *hey tried a Foint %enture in =ermany and -hina
ho4e%er it has failed. *he failure is more due to Wal-Mart inability to cater to
the interests and ideals of the en%ironment that is going into. *hrough further
research and cultural understanding" t4o things that Wal-Mart does not
implement 4ell" they 4ould be able to e1pand and enter into the global
mar/et in these countries 4ell. *o become a global player in the global
mar/et" Wal-Mart has to gain access into -hina and ,apan. In order to be
considered in all other Asian countries" ha%ing a foot-hold" not necessary a
strong-hold" in ,apan and -hina is detrimental.


- '; -

Proposed Alternate Solutions

&or the company to recapture some of the lost enthusiasm it is currently
e1periencing both internally and e1ternally" Wal-Mart needs to refocus on the
core concepts that got them there. *he most important of these is their focus
on IassociatesI. e/indling the bond that 4as once pre%alent 4hen Sam 4as
ali%e is instrumental to re%i%ing o%erall appeal. If the associates see interest
being ta/en in them" that in turn 4ill transfer o%er to their customers.

Aggressi%e pursuit" re@nement and implementation of their Sustainability 37(
program is instrumental to their long-term success as a company and could
4ell de@ne them as an industry leader 4hen it comes to doing 4hat?s right for
the en%ironment. =aining the trust of consumers in regards to their public
image 4hen it comes to energy" 4aste and the en%ironment can ha%e a
dramatic impact on their ability to capture ne4 customers 4ho shop there Fust
on the basis that its a company dedicated to doing right 4hen it comes to
being an en%ironmentally friendly corporation.

Another idea to further Wal-Mart?s ambitions in becoming a global mar/et is to
better understand their en%ironment. *o better understand their en%ironment"
they 4ould need to gain access to ne4 mar/ets through Foint %entures as they
are currently doing in India. While they e1plore ne4 mar/ets" they should
allo4 for the gro4th at a rate that they are not used to. *o e1pand into a
culture that does not ha%e the same ideals as you" you need to ha%e patience
and communication 4ith the local en%ironment to fully understand the culture
in 4hich they may not be accustom too.

&or the recommendation of ho4 to better their public image here" Wal-Mart
4ould need to ma/e some radical changes. *he corporate memo that 4ent
public about ho4 they 4ould change their 4or/ force from a L(T'( Nfull-timeT
part-time 4or/ersO to a 7(T;( all to reduce costs of employee bene@ts" drop
co%erage for associates that ha%e spouses or force them to part-time" 4ould
reDuire some %ery radical transformations. .ne-4ay of transformation is to
ta/e a poll of the associates" 4ith an :((U none Fudgmental approach. Allo4
it to be in complete con@dence 4ithout rami@cations to the employee based
upon their responses" and ta/e their ideas into consideration. Allo4 those that
need certain shifts to 4or/ them" allo4 those that need health care the
opportunity for co%erage and ta/e the diEerence in corporate ta1 e1penses.
*he go%ernment oEers grants for this reason if the company loo/s for the
right opportunities.

ecommendations

Setup a program under the human resources department to monitor strategic
controls concerning the social problems arising from associates at the store
le%el to ensure that employee concerns are heard and addressed
appropriately at the corporate le%el.

-onsidering the amount of la4suits Wal-Mart has faced in the past concerning
unFust treatment their employees" unfair opportunity and bene@t pac/ages"
Wal-Mart should not only address the concerns of their store le%el employees
but also monitor the resolutions to ensure that these concerns are addressed.
- '< -
In order to ensure these concerns are accurately portrayed employees should
feel comfortable and ha%e open opportunities to submit complaints directly to
6uman esource at the corporate le%el rather then @ltered through local
management. -onsidering WalMart?s has a strong IS department 4here
employees are reDuired to 4or/ in the Fob responsibilities before de%eloping
soft4are" they should employ IS staE to Fob positions in locations 4here the
most amount of concerns are present. *he IS staE 4ill not focus on the nature
of each indi%idual concern rather identify a common %ariable bet4een the
complaints and de%elop an open system that 4ill encourage those employee?s
to %oice their concerns directly to 6 4ithout fear of repercussion. By
de%eloping applications that 4ill trac/ and monitor the o%er all satisfaction of
the store le%el employees they can maintain a %alue database of information
in order to poll o%er4helming concerns that may seem repetitious or
alarming. By employing systems that 4ill monitor and archi%e employee
complaints Wal-Mart management at the corporate le%el should be able to get
a broader picture of concerns arising in local mar/ets in it?s past and present.

Monitor and poll international mar/ets identifying discount trends and
customer preference in ne4 and un/no4n mar/ets before approaching ne4
%entures or corporate buyouts.

Wal-Mart?s future sustaining its desired gro4th pattern is undoubtedly in its
international mar/ets. 6o4e%er" Wal-Mart has continuously entered mar/ets
4here there presence 4as either undesired or customer preferences 4ere not
fully understood. Its seems that Wal-Mart?s current strategy is to gain local
presence in communities is by buying up land acDuiring building contracts
and then address the concerns of the local community in the de%elopment
stages as they arise. Wal-Mart should approach ne4 mar/ets 4ith great
opportunity but also 4ith a %ery good understanding of the local culture and
mar/et. By placing mar/eting management in strategic research rolls to poll
and reDuest feedbac/ from the local communities before entering into a
particular local mar/et they may @nd a better understanding of the needs of
their clients. .nce they pro%ide acDuire feedbac/ and analysis the concerns
of the community at hand they may @nd greater opportunity to assist and
ser%e the mar/et. *his approach 4ill not only oEer them understanding of the
mar/et but also pre%ent an undesired bac/lash once the proFect has already
begun.

Summary

*hroughout the entire e1ploration of the organi!ation" Wal-Mart" 4e ha%e
gained a better understanding of the organi!ations strategies and the turmoil
that is plaguing. Primarily the issues disco%ered 4ithin Wal-Mart are in its
inability to gain access to global mar/ets" regain its public image as the AMost
Admired -ompany in AmericaB" and steadily increase its mar/et share. Wal-
Mart has long since been the largest retailer in the 4orld" ho4e%er 4ithout
increased gro4th" further e1pansion in other locations besides Americas" it
4ill become %ery stagnant. With further consideration into the
recommendation made by *eam Wal-Mart" they may be able to gain access"
increase pro@tability" increase global mar/et share and del%e into more global
mar/ets 4ith Foint %entures. 6a%ing a better understanding of 4hat is holding
you bac/ may @nally position them to the stature of global domination that
they desire.

- '7 -
*heir history further pro%ides information into ho4 the success of their past
needs to be re/indled to better gain success into their future. By regaining
their once admired" Sam Walton?s dream" they may be able to reach the
proFection of 4hat they see themsel%es becoming in the future and allo4 the
organi!ation to successfully reach the global gro4th they see/. Better
understanding of their e1ternal and internal en%ironment 4ill dra4 further
focus on change and e1pansion in both e1isting and ne4 mar/ets.
-omprehension of their need to further de%elop their intellectual assets
globally 4ill allo4 for Wal-Mart to e1pand internationally at a rate that they
ha%e here in the states. eformation of their business strategies at the
corporate le%el 4ill allo4 for their associates to feel li/e the community that
Sam once held so strongly has been regained. 6a%ing a better connection
4ith 4here your employees @t into the larger scheme of the corporate
strategy 4ill enable the organi!ation to better its public image by changing
the o%erall treatment by enriching their employees and oEering further
de%elopment and adFustments to local management. If you ha%e a positi%e
and nurturing 4or/ en%ironment that encourages and promotes employee
cohesi%eness 4ithin" then the rest 4ill fall into place. With the right strategies
Wal-Mart can be the organi!ation 4ith global dominance their stoc/holders
desire 4ith the %ision Sam Walton once dreamed.
- ') -
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- '8 -